Current Marketing Thoughts

Will US corn get larger like it did in 2009?

Aug 27, 2013

Corn bulls are wondering just how high prices can climb on the heels of the soybean market. The bears are screaming that even though individual farmers are not talking about record yields, the US as a whole is still on track to break all previous production records for corn. If you remember it was back in 2009 that US farmers produced a record US crop of 13.151 billion bushels and prices in Sept of 2009 plummeted to $2.96^6 per bushel. I am certainly not calling for a repeat performance, but I do believe it is important to review and understand our history. Below are a few highlights and comparisons I think we need to consider:

2009 set a NEW record for US corn production at 13.151 billion bushels. This record still stands, but looks as if it could be beaten this year. The current USDA corn production total is estimated at 13.763 billion bushels.

FWIW back in August of 2009 the USDA was projecting a crop of just 12.761 billion bushels, by Jan (the final report) that number jumped to 13.151 billion.

Harvested acres in 2009 fell from 80 million in the Aug 2009 report down to 79.6 million acres. Meaning they only cut 400,000 from their Aug 2009 estimate. This time around there is talk the USDA could cut 2-3 million from their current harvested acreage estimate. This would still leaves us with 7-8 million more acres than in 2009.

Planted acres were reported at 87 million in the August 2009 report. Final planted acres were adjusted down to 86.5 million. This year around we could be 10 million acres higher considering the current USDA estimate is that we planted 97.4 million corn acres.

Yield estimate in the Aug 2009 report was at 159.5 bushels per acre, of which it eventually grew in size to 165.2 final yield estimate.

Total corn usage was estimated at 12.875 billion back in Aug 2009 vs. a very similar 12.765 billion in the most recent Aug USDA report.

Ending stocks were estimated at 1.621 billion in Aug of 2009 vs. the most recent USDA estimate of 1.837 billion. The big kicker and key to this entire puzzle is that "beginning stocks" in the Aug 2009 report were estimated at 1.720 billion bushels vs. just 719 million currently being estimated by the USDA. That means we had an extra 1 billion bushels in the pipeline compared to what we have available today. That makes a huge difference!

Prices in return during Sept 2009 fell to $2.96^6.

The question is will the US corn crop get larger like it did in 2009? Will we collectively set a NEW record for production? Or will the yield setback even further while at the same time seeing major cuts in harvested acreage? We could obviously go either direction right now, but with a billion fewer bushels to rely on the trade is clearly more nervous. Producers should be looking to reduce just a little more new-crop risk on the rallies to insure profitability, but don't let the perma-bears talk you into selling out just yet. I am going to pull the trigger on another 5% fairly quickly, in an effort to get 70% priced/hedged. Remember, for most of us (with storage) we have at least another 12-months to market our remaining 30%. I am fairly confident we can be somewhat patient and selective with our efforts.